Cathay Pacific Group Announces Restructuring, Will Cease Cathay Dragon Operations
As a result of the impact of the global COVID-19 pandemic, the airline will restructure to protect the company’s future, secure their Hong Kong hub and protect as many jobs as possible.
Today (October 21, 2020), Hong Kong-based Cathay Pacific Group announced a corporate restructuring in order to preserve the company’s future, protect their Hong Kong hub and protect as many jobs as possible. The company will emerge from restructuring as a more focused, efficient and competitive business by harnessing Cathay Pacific’s strengths while leveraging the potential of their low-cost carrier (LCC) HK Express subsidiary. Effective immediately, the Group’s wholly-owned regional subsidiary, Cathay Dragon, will cease operations. The company expects to receive regulatory approval to absorb most Cathay Dragon’s routes. Cathay Pacific will also implement 8,500 redundancies across the entire Group, around 24 percent of their total workforce. In Wednesday’s announcement, Cathay Pacific’s Chief Executive Officer, Augustus Tang, said,
“Our immediate priority is to support those affected by today’s announcement. We are deeply saddened to part ways with our talented and respected colleagues, and I want to thank them for their hard work, achievements and dedication. Cathay Pacific will be offering severance packages that go well beyond statutory requirements. It will also be extending medical benefits and staff travel entitlements, as well as providing counselling and job transition support services. There will be no offset against pension contributions. We have taken every possible action to avoid job losses up to this point. We have scaled back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, implemented a recruitment freeze, executive pay cuts and two rounds of Special Leave Schemes. But in spite of these efforts, we continue to burn HK$1.5-2 billion cash per month. This is simply unsustainable. The changes announced today will reduce our cash burn by about HK$500 million per month.
“We have studied multiple scenarios and have adopted the most responsible approach to retain as many jobs as possible. Even so, it is quite clear now recovery is going to be slow. We expect to operate well under 25% of 2019 passenger capacity in the first half of 2021 and below 50% for the entire year. Over its 35 years, Cathay Dragon has earned a well-deserved reputation for excellence, thanks to its outstanding service and distinct hospitality, delivered by a remarkable team. Whilst this is a difficult time, we are a resilient Group and a proud Hong Kong brand. I believe in this plan and I know we will prevail. We remain absolutely confident in the long-term future of Cathay Pacific, the Hong Kong aviation hub and the critical role Hong Kong will play in the Greater Bay Area and beyond.”
Cathay Pacific has been able to reduce the 8,500 redundancy total to 5,900 (including 5,300 Hong Kong Jobs and 600 jobs outside Hong Kong) due to a hiring freeze and natural attrition. As part of the restructuring plan, Hong Kong-based cabin and cockpit crew members will be asked to make concessions to their current conditions of service to match compensation to productivity and enhance market competitiveness. Additionally, executive pay cuts will continue throughout 2021 and a third voluntary Special Leave Scheme for non-flying employees will be launched during the first half of next year. Finally, the company has frozen salary increases for 2021 and the annual discretionary bonus for 2020 has been suspended across the board.
Source: Cathay Pacific